March 15, 2023 Global stocks and banking news

Stocks closed mostly lower on Wednesday as investors grappled with the crash of Credit Suisse stock and how the fallout could affect global and domestic markets.

Troubles at the systemically important Swiss lender come as markets struggled to make sense of the collapse of Silicon Valley Bank and Signature Bank.

The Swiss National Bank said Wednesday said that it will provide Credit Suisse with liquidity if necessary, after shares tumbled as much as 30%.

Shares of the bank closed down 24%.

Major US banks continued to get hammered. Shares of Wells Fargo fell 3.2%. JPMorgan Chase stock dropped 4.7%.

The Dow fell roughly 280 points, or 0.87%.

The S&P 500 fell about 0.7%.

The Nasdaq Composite inched up 0.05%.

Nervous bank customers have rushed to the safety of big banks in the wake of a pair of high-profile bank failures that have shaken confidence in the system.

Bank of America, Wells Fargo and Citigroup have all experienced a significant increase in deposits since Silicon Valley Bank ran into trouble last week, people familiar with the matter tell CNN.

Small and regional banks have suffered deposit outflows, though a senior Treasury official told CNN earlier this week that those customer withdrawals have eased.

The situation is fluid and it's not clear just how much money has been plowed into big banks, though the sum is likely to be in the billions or tens of dollars. 

Stocks remained down Wednesday afternoon as deepening troubles in the banking sector continued to roil markets.

The Dow was down 350 points, or just over 1%. The S&P 500 slipped by 1%, while the Nasdaq Composite lost 0.8%.

Shares of Swiss lender Credit Suisse tumbled over 20% after its biggest shareholder said it wouldn't increase funding in the bank, setting off fears about the strength of one of the world's biggest financial institutions. This comes just days after the collapse of Silicon Valley Bank and Signature Bank sent Wall Street into a frenzy. 

It remains unclear how the two banks' collapses, and now the crash in Credit Suisse's stock, will affect global and US markets as well as the economy.

The CME FedWatch Tool shows that traders see a roughly 45% probability that the Fed won't raise interest rates at its meeting next week. Traders saw a 55% probability of a quarter-point rate hike.

CNN's Fear & Greed Index was at 18, indicating extreme fear in the market. That shows more fear has entered the market since this morning, when the index clocked in at 22.

Shares of US banks also continued their descent. Wells Fargo stock fell 4.8%. Shares of JPMorgan Chase were down 5.1%.

The bond market has seen heightened volatility as the turmoil in the banking sector roils the equity market. The ICE BofA MOVE Index, which measures volatility in the bond market, surged to levels last seen during the onset of the Covid pandemic in March 2020.

Bond yields fell Wednesday as skittish investors shaken by banking fears sought refuge in safe holdings.

The 2-year Treasury yield on Monday saw its biggest one-day drop since October 1987's Black Monday, and continued its descent on Wednesday. Long-term Treasury yields also fell.

European markets have closed sharply lower as bank stocks across the continent plunged, led by Credit Suisse. Shares in Credit Suisse, one of Switzerland’s biggest banks, crashed more than 20% on Wednesday after its biggest shareholder appeared to rule out providing any more funding for the embattled Swiss lender.

The sell-off spilled over into other European banking shares, with French and German banks such as BNP Paribas, Societe Generale, Commerzbank and Deutsche Bank falling between 8% and 12%. 

In the UK the FTSE 100 ended the day more than 3.5% lower, France’s CAC 40 and the German Xetra Dax both closed more than 3% down.

Only two US banks have failed so far this year, but if it feels like the demises of Silicon Valley Bank and Signature Bank have had an outsize effect on the banking sector ... you're right.

SVB and Signature had a combined $319 billion in assets — which means 2023 is already the second-worst year for US bank failures since the Federal Deposit Insurance Corporation (FDIC) began tracking data in 2001. The worst? 2008's Great Recession.

Our colleagues Renée Rigdon and Matt Stiles of CNN Digital's data and graphics team put the failures of 2023, 2008 and other years into visual context with the graphic below.

(By the way: Although Silvergate collapsed last week, it hasn't officially failed, according to the FDIC.)

Lloyd Blankfein, senior chairman and former CEO of Goldman Sachs, agreed with US Sen. Sherrod Brown’s assessment that more regulation is needed to prevent a situation like Silicon Valley Bank’s collapse from happening again. 

Appearing on CNN’s Erin Burnett Outfront on Tuesday, Blankfein told host Erin Burnett that regional and smaller banks have “the authority to extend the US government’s credit.” 

“And that credit has to be protected — whether it’s a big bank or a little bank,” he said. “And so there’s been a number … of levels of scrutiny and regulation that applies depending on how big the banks are. But I think at this point we recognize that a $250 billion bank is no small bank. And, you know, perhaps a $50 billion bank is no small bank. And even smaller ones.”

“So, I think there’s going to be regulation that normally applies to the biggest banks will probably have to be extended. And that regulation includes bigger stress tests, having to have more capital, and other features that generally make the system safer,” he said. 

Lloyd Blankfein, senior chairman and former CEO of Goldman Sachs, said it was “laughable” that Silicon Valley Bank collapsed because it had board members who belong to minority communities.  

During a conversation with Erin Burnett on CNN’s Erin Burnett Outfront Tuesday, Blankfein reacted to a quote from Florida Governor Ron DeSantis and a Wall Street Journal op-ed by Andy Kessler. 

DeSantis blamed the bank’s collapse on its concern with “DEI [diversity, equity and inclusion] and politics.”

Kessler, meanwhile, wrote, "In its proxy statement, SVB notes that besides 91% of their board being independent and 45% women, they also have “1 Black,” “1 LGBTQ+” and “2 Veterans.” I’m not saying 12 white men would have avoided this mess, but the company may have been distracted by diversity demands.” 

Instead of addressing the quotes head-on, Blankfein said that in retrospect, signs of the bank’s collapse were missed. 

“Banks publish the unrealized losses that are embedded in their portfolios,” he said. “It was there to be seen… It wasn’t seen to be that dangerous given that the bank didn’t have to sell any of those securities. But they certainly did once withdrawals started to be made. And so, in hindsight, it will have appeared to have been in plain sight, and the signals will have been missed. But it became critical only when deposits were withdrawn and the banks needed to sell those out-of the-money securities in order to raise funds.” 

When Burnett asked again if the bank collapsed because it was focused on placing a black person or a gay person on its board, Blankfein responded: 

“I’m not an expert in mass psychology, but I think that’s very unlikely and I think frankly it’s a bit laughable.” 

Officials at the Treasury Department are monitoring the situation at Credit Suisse and are in touch with their global counterparts, a Treasury spokesperson told CNN Wednesday.

Shares of Credit Suisse crashed more than 20% Wednesday to a new record low after its biggest backer appeared to rule out providing any more funding for the embattled Swiss lender.

That brought down the stocks of several European banks, US banks and the broader market along with it.

First Republic Bank’s credit ratings were downgraded on Wednesday by both Fitch Ratings and S&P Global Ratings on concerns that depositors could pull their cash despite the federal intervention.

Fitch also placed another regional bank, PacWest Bancorp, on watch for a potential credit ratings downgrade of its own.

The moves reflect continued worries about the banking system in the aftermath of the collapse of Silicon Valley Bank and Signature Bank.

“We believe the risk of deposit outflows is elevated at First Republic – despite actions by federal regulators,” S&P wrote in its report.

First Republic shares tumbled 16% to session lows in midday trading following the downgrades.

Both credit ratings firms pointed to the large amount of deposits at First Republic that are uninsured because they are above the $250,000 FDIC limit.

The San Francisco-based lender has a high concentration of deposits among wealth clients in coastal markets in the United States, a characteristic that is now viewed as a “rating weakness” in today’s environment.

“This not only drives a high proportion of uninsured deposits as a percentage of total deposits but also results in deposits that can be less sticky in times of crisis or severe stress,” Fitch said. “Fitch believes this feature of the business model has resulted in franchise erosion following the high profile failures of SVB Financial and Signature Bank, despite the deposit base being more diversified from a sector/industry standpoint.”

From a practical standpoint, a credit ratings downgrade can make it more expensive for banks to borrow.

Both Fitch and S&P warned they could downgrade First Republic further.